Better identification and allocation of risks between stakeholders, Renegotiation clause of Concession Agreement, Institutionalization of mechanism like the. Under the EPC … In EPC model, a player just executes the order book and gives it back to the government. Explain how it will revitalise infrastructure deficit to achieve broad developmental objectives? About 30 highways projects have been awarded under HAM by the National Highway Authority of India (NHAI) at a total cost of about ₹28,000 crore. Infra investments are key for economic growth, something all of us are rooting for. EPC procurement is widely used and understood and is the most "bankable" procurement method EPC and EPCM Procurement - Issues for Owners 7. Examine. vBuild up capacity in all stakeholders, including regulators, authority, consultants, financing agencies, developers. On the other hand, limited competition for HAM projects is likely to result in lucrative IRRs. Updated: 07 Jan 2019, 01:09 AM IST Tanya Thomas. Further, the Government has also not ignored the Private Public Partnership model which largely relies on the BOT mode of project implementation. Hence, the Hybrid Annuity model (HAM) which is a mix of BOT Annuity and EPC has been adopted in recent times. The preponderance of EPC projects during FY14 and FY15 helped even those companies which did not have good balance sheet strength to win road projects and consequently bulk up their order books. Varieties . Build-Operate-Transfer (BOT) BOT is a private sector participation model in which a project company (Promoter) is established to finance, design, construct and operate a facility for a concession period before it is transferred to the government (Özdogan and Birgönül, 2000). - EPC & BOT Contracting - EPC for solar projects indicates a key element of BOS cost. Also, more and better roads mean smoother rides and less traffic congestion; who doesn’t want that? Inadequate acceleration in private sector projects due to unfavourable market conditions. Hence, the Hybrid Annuity model (HAM) which is a mix of BOT Annuity and EPC has been adopted in recent times. The government starts paying the developer once the project is in commercial use. For more information, see our Cookie Policy. An EPC Contract encompasses the E (Engineering/Design), P (Procurement) and the C (Construction) and pre-commissioning & commissioning of individual systems involved in the project. While in new HAM a dramatic realignment of Risk sharing is brought in. With an average HAM project in FY17 costing more than double EPC project and being ~70% longer, the HAM mode formed the largest chunk of projects as far as cost and length of projects are concerned. HAM projects are also being tested in urban infra developments such as metro rail projects — again, a leg-up for faster commuting. The broader issue of toll collection from public with their willingly cooperation is an unresolved problem. BOT is the typical structure for project finance. Not even a single EPC project was awarded in the sector between 2008-09 and 2011-12. It has been three years since HAM was brought in as EPC projects faced significant delays and cost escalation, which hurt the margins of road developers. From the Government’s perspective, it gets an opportunity to flag off road projects by investing a portion of the project cost. HAM is a mix between the existing models – BOT Annuity and EPC. After the failure of Build-Operate-Transfer (BOT) model, the government was relying on EPC model to award highway projects. 'Engineering, Procurement, and Construction, and Balance Of Plants' is one option -- get in to view more @ The Web's largest and most authoritative acronyms and abbreviations resource. In the past, many assumptions on traffic had gone awry affecting returns Now, they are unwilling to commit large sums of money in such models. As it relates to new build, there is no revenue stream from the outset. The government starts paying the … Ready-to-eat hams are available in both boneless and bone-in styles; a bone-in ham is superior in every way but one: ease of slicing. However, in recent times EPC has once again made a comeback … Hybrid Annuity Model (HAM) is a combination of two models i.e., the EPC (Engineering, Procurement and Construction) model and BOT - Annuity (Build, Operate, Transfer) model. However, introduction of HAM mode in FY16 has radically changed the overall complexion of project award. Going forward HAM projects are expected to continue to constitute a significant proportion of the overall award mix. The detail of engineering, procurement and construction (EPC) involves land, solar modules, invertors, cables, installation, etc. HAM is a good trade-off, spreading the risk between developers and the Government. Under BOT, the Private sector faced huge financial burden whereas under EPC, the Government faced a heavy financial burden. I believe the answer helps in understanding why National Highway in India projects are being implemented via EPC model than PPP. As per the design, the government will contribute to 40% of the project cost in the first five years through annual payments (annuity). To address the above concerns it is imperative to create quality infrastructure by different means. NPA-riddled banks were reluctant to lend to these projects. Ham is globally produced with emphasis on cultural specialties, for example, prosciutto, speck or jamon serrano.Ham curing can be 8 months to 2 years. Select Accept cookies to consent to this use or Manage preferences to make your cookie choices. India’s infrastructure deficit-whether congested roads and ports, inadequate hospitals or wastewater treatment facilities, and slow trains-is a key factor constraining rapid, competitive economic growth and job creation and thereby imposing huge costs on society. Low productivity, poor competitiveness, high costs, and the slow pace of urbanization are some of the consequences of this deficit. Standards & Poor definition of PPP is any medium to long term relationship between public and private sectors, involving sharing of risks and rewards for multi sectorial skills, expertise and finance to deliver desired policy outcomes. Rapid Urbanisation, increase in per capita income and high industrial growth led demand for basic infrastructure such as water supply and sanitation, seamless transportation and energy. However a Turnkey Contract which is the entire project from concept to commissioning and startup of the entire plant/system up to stabilize the operation and end product. The balance 60 per cent is arranged by the developer. EPC is a popular model being adopted globally in many projects like road construction, roof-top solar projects, etc. Rising share of HAM projects in overall awards implies that the balance of power is once again likely to shift towards companies which have the necessary balance sheet might to infuse the equity required in these projects. The concept of paying end user charges for public utilities created by government or private agencies is not yet fully accepted in India. Recently kelkar committee submitted report on Revitalising and reviving languishing infrastructure projects. Hence, both the models do not seem feasible. The HAM is a mix of engineering, procurement and construction (EPC) and build-operate-transfer (BOT) formats, with the government and the private companies sharing the total project cost in the ratio of 40:60 respectively. BOT Annuity Model: In this model the private party builds the project and transfers it back to the government. - EPC & BOT Contracting - EPC for solar projects indicates a key element of BOS cost. As the name suggests, HAM’s a hybrid — a mix of the EPC (engineering, procurement and construction) and BOT (build, operate, transfer) models. After initial signs of aggressive bidding, competition for HAM projects is moderating—limited to 7-8 players. Hence to understand the HAM, we should know the basic features of the existing PPP models. The annuity payment structure means that the developers aren’t taking ‘traffic risk’. Over the years, unlisted players have won a large number of NHAI projects. Engineering, procurement, and construction (EPC) contracts, sometimes called turnkey contracts are similar to design and build contracts, in that there is a single contract for the design and construction of the project, but generally with an EPC contract, the client has less say over the design of the project and the contractor takes more risk. The brief picture of Risk Allocation can be tabulated as in Table: Q.) Companies with weak balance sheets that do not support investing in BOT or HAM projects are bidding aggressively for EPC projects. Half the projects awarded in 2016-17 were under HAM. EPC: Engineering, Procurement and Construction If you wish to have only one point of contact and limit your involvement in the project, probably EPC is an option for you. It means consolidated liability in case of warranty cases, effective communication and a minimum number of interfaces. In India, the new HAM is a mix of BOT Annuity and EPC models. To fulfil these demands India has systematically rolled out a PPP program with increasing budgetary allocation in 12th FYP for the delivery of high-priority public utilities and infrastructure. An advanced version of (MCA) Model Concession Agreement HAM model is a mix of BOT (Built Operate Transfer) and EPC (Engineering, Procurement and Construction) model. See our, Electric Vehicle & Challenges of US Surface…, Contractors May Benefit by Taking Equity in…. Fresh ham tastes similar to pork tenderloin, while dry-aged country ham is quite salty with a chewier, more dense texture. Also, if the compensation structure didn’t involve a fixed compensation (such as annuity), developers had to take on the entire risk of low passenger traffic. The private player has no role in the road’s ownership, toll collection or maintenance (it is taken care of by the government). ENN shares global EPC resources to deliver a sound project schedule, quality and BOS cost, offering a solid ROI within the financial framework. The detail of engineering, procurement and construction (EPC) involves land, solar modules, invertors, cables, installation, etc. Considering this, order book stands at Rs155.3 bn (3.5x TTM revenue). National Highways Authority of India (NHAI) pays private players for the construction of the road. However, in recent times EPC has once again made a comeback … This indicates that they have the ability to compete with listed companies which are generally considered to be better funded compared to their unlisted peers. Under the EPC model, NHAI pays private players to lay roads. Examine. LTD However government is well equipped to deal with law and order problem arising out of non-payment of toll by some sections of local community, than a private contractor (some attempts to convert toll into fuel surcharge has not worked since refuelling of vehicles is chosen by user far away from toll points). BOT model has structured the risk sharing with a major responsibility on the Contractor, managing financing risk, revenue risk and O&M risk apart from usual construction risk and government (or NHAI) was required to manage right of ways and granting toll collection rights to the Concessionaire. After a slow start in FY16, HAM project award gathered steam in FY17—the number of awarded in FY17 was almost equal to EPC projects. The Government with full ownership of the road, takes care of toll collection and maintenance of the road. EPC is a popular model being adopted globally in many projects like road construction, roof-top solar projects, etc. HAM’s good for the road — and that’s not hamming it up. The essence of HAM model arose due to requirement of better financial mechanism where the risk would be spread between developers and the Government. Under the BOT model private players have an active role in road construction, operation and maintenance of the road for a specified number of years as per agreement. The government also shoulders the responsibility of revenue collection. PNC won the Challakere-Hariyur HAM (EPC Rs9.35 bn) and 4 HAM and 2 EPC projects (EPC value Rs68.3 bn) which are not included in order book. I believe the answer helps in understanding why National Highway in India projects are being implemented via EPC model than PPP. ENN shares global EPC resources to deliver a sound project schedule, quality and BOS cost, offering a solid ROI within the financial framework. How it is different from EPC? Makes this topic important from exam point of view. The annuity fee arrangement is known as BOT-Annuity; essentially, the toll revenue risk is taken by the government, while the private player is paid a pre-fixed annuity for construction and maintenance of roads. The developer usually invests not more than 20-25 per cent of the project cost, while the remaining is raised as debt. NPA-riddled banks were becoming wary of lending to these projects. “Engineering, Procurement, and Construction” EPC is a particular form of contracting arrangement used in some industries where the EPC Contractor is made responsible for all the activities from design, procurement, construction, to commissioning and handover of the project to the End-User or Owner. Even projects under build-operate-transfer were not faring well. Reports of delayed or stalled infrastructure projects. Although the engineering, procurement and construction (EPC) contract and the engineering, procurement and construction management (EPCM) contract have been present in the construction sector for many years, there remains confusion as to the fundamental differences between these contracts, the role each party is required to play, and when to use one contract over the other. In the process, they have brought in hybrid combination of old Annuity and BOT model and also EPC contract risks strategies. Under HAM, Revenue collection would be the responsibility of the National Highways Authority of India (NHAI).The developer doesn’t have right to collect revenue. It has been three years since HAM was brought in as EPC projects faced significant delays and cost escalation, which hurt the margins of road developers. On behalf of the government, NHAI releases 40 per cent of the total project cost. LTD is the parent company of CIVILSDAILY IAS. There are then the trade or subcontractors and major vendors engaged either by the EPC (200 Words) Livemint The Build Operate and Transfer (BOT) Annuity Model. Since there was no compensation structure such as annuity, the developers had to take entire risk in low traffic projects. This helps cut the overall debt and improves project returns. What role these models play in government’s ambitious road development programme? EPC: Engineering, Procurement and Construction If you wish to have only one point of contact and limit your involvement in the project, probably EPC is an option for you. Types of Ham. HAM arose out of a need to have a better financial mechanism for road development. Bank Details: Set up an institute of excellence in PPP to inter alia guide the sector, provide policy input, timely advice and undertake sustainable capacity building. whereas the remaining 60% is raised by developer from equity or loan as variable depending upon the value of assets created. An advanced version  of  (MCA) Model Concession Agreement HAM model is a mix of BOT (Built Operate Transfer) and EPC (Engineering, Procurement and Construction) model. A developer builds the highway, operates it for a specified duration, and transfers it back to the government. India offers today the world’s largest market for PPPs. Changing trends Published on December 27, 2016 December 27, 2016 • 205 Likes • 18 Comments Photo: Mint NHAI likely to drop BOT, focus on hybrid annuity, EPC projects 1 min read. Looking for the definition of EPC AND BOP? The government starts payment to the developer after the launch of commercial operation of the project. The Build Operate and Transfer (BOT) Annuity Model. The Government pays private player a pre-fixed annuity for construction and maintenance of roads. The government has focussed on shifting the mode of project implementation away from the BOT model towards the EPC and HAM models, and it seems to have made a positive impact in terms of improving the pace of road construction activity and the ability to award projects. APEIROGON TECHNOLOGIES PVT. Under the EPC model, the private players construct the road and have no role in the road’s ownership, toll collection or maintenance. PPP structures not to be adopted for very small projects. Project sponsors arrange PPP mode was dominant during FY10-13; EPC mode made a comeback during FY14-16 with HAM mode making a mark in FY17. Hybrid Annuity Model (HAM) is a combination of two models i.e., the EPC (Engineering, Procurement and Construction) model and BOT - Annuity (Build, Operate, Transfer) model. Under the BOT model though, private players have an active role — they build, operate and maintain the road for a specified number of years — say 10-15 years — before transferring the asset back to the government. Find out what is the full meaning of EPC AND BOP on Abbreviations.com! In recent past, existing companies operating under BOT model have reported toll leakage from 15 to 22 % due to demands from various pressure groups of end-users. Lenders are therefore anxious to ensure that project assets are ring-fenced within the operating project company and that all risks associated with the project are assumed and passed on to the appropriate actor. On behalf of the Government, NHAI releases 40 per cent of the total project cost, in five tranches linked to milestones. Under BOT, the private player arranged all the finances for the project, while collecting toll revenue or annuity fee from the Government, as agreed. Financial burden of private players and even government will reduce. The non-cooperation of frequently travelling local people is a well-known problem. The balance 60 per cent is arranged by the developer. Discuss major recommendations of kelkar committee. Under BOT, the private players arrange all the finances for the project, while collecting toll revenue (BOT toll model) or annuity fee (BOT annuity model) from the Government, as agreed. So, it’s important that these projects take off — HAM a big help here. India will be the world’s most populated country before 2030, outgrowing China. HAM combines EPC (40 per cent) and BOT-Annuity (60 per cent) Models. Difference between an EPC and BOT Contracts in 2 Min - YouTube The HAM model is a mix of pure EPC and BOT models. Partial Funding of Projects: Under HAM, Government provides partial funding of projects which is a middle path when compared to zero funding under BOT and complete funding under EPC. While cash flow stress in road companies over FY12-14 had led to the EPC mode making a comeback, gradual improvement in financial health of select developers and introduction of HAM is wooing back road developers to the bidding table. Even projects under build-operate-transfer were not faring well. By using this site, you agree to this use. Ministry of Statistics and program Implementation. You can change your cookie choices and withdraw your consent in your settings at any time. A/C Name: APEIROGON TECHNOLOGIES PVT. Sources: #UnionBudget #EconomicSurvey #Businessline #HAM #EPC #BOT #NHAI, #HAM #EPC #BOT #Riskmanagement #projectfinancing, This website uses cookies to improve service and provide tailored ads. Slowdown in delivery of projects has been attributed to over regulation, problems in land acquisition and scarcity of funds. Bhopal-based Dilip Buildcon Ltd has won six contracts, which were between 13% and 31% below the estimated cost. Investment in infrastructure in India has posed a challenge in the last few years. Ham is the raw rear leg (rump to shank) of a hog, which is preserved by smoking dry-curing or wet-curing. In BOT, a player has to build, operate and maintain a road project for a specific period before it is given back to the government. BITS Pilani, Pilani Campus • FP versus BOT & BOOT ⁻ In FP, private sector has a role as engineer or constructor, Ownership, operation and financing ⁻ On the other hand a pure private is responsible for all matter. This should result in lucrative IRRs for financially strong players. It is given in five tranches linked to milestones. EPC (Engineer-Procure-Construct) and Design-Build have both existed as mainstream delivery methods for decades, but what's the difference between the… Here, the developer usually invests not more than 20-25 per cent of the project cost (as against 40 percent or more before), while the remaining is raised as debt.